Emerging Stocks Retreat After Two-Day Gain as Energy Shares Drop

Emerging-market stocks fell for the first time in three days as China Shenhua Energy (1088) Co. led a slump in energy producers. India’s rupee and South Korea’s won slid.

Shenhua Energy, the listed unit of China’s largest coal producer, sank the most in a week in Hong Kong after the government said it will control consumption of the fuel. China Coal Energy Co. tumbled 4.4 percent after the stock was removed from Hong Kong’s Hang Seng Index. Indian drugmaker Cipla Ltd. (CIPLA) slumped the most since 2010 in Mumbai after profit missed estimates. The rupee and won weakened 0.3 percent versus the dollar while Indonesia’s rupiah strengthened 0.3 percent.

The MSCI Emerging Markets Index fell 0.5 percent to 948.47 as of 1:53 p.m. in Hong Kong, retreating from a three-week high and paring a 1.2 percent advance so far this week. China’s government said it will set up a fund to reduce air pollution in the country’s largest cities, seeking to cut fossil-fuel use and control coal consumption. Indonesia’s central bank plans to review monetary policy today.

“Some investors are taking profit after the rally in the last two days,” Giang Trung Kien, head of research at FPT Securities JSC said in Hanoi. “The market hasn’t formed a downward trend.”

The MSCI emerging markets gauge has declined 5.3 percent this year and trades at 9.2 times projected 12-month earnings. The MSCI World Index has dropped 1.5 percent this year and is valued at 14.6 times, data compiled by Bloomberg show.

China’s Pollution

Nine out of 10 industry groups in the developing-nation gauge fell, led by energy and financial companies. Shenhua Energy slid 2.8 percent, the most since Feb. 4. China will set up a 10 billion yuan ($1.65 billion) fund to help to curb air pollution in its biggest cities, according to a release from a State Council meeting at which Premier Li Keqiang presided. Coal is the country’s largest source of energy.

The Hang Seng China Enterprises Index (HSCEI) of mainland companies retreated 1.1 percent, after posting the biggest two-day rally since November 19.

China Coal Energy headed for the steepest loss since July 30. The stock will be removed from Hong Kong’s stock market benchmark effective March 10, Hang Seng Indexes Co. said in a statement yesterday. China Mengniu Dairy Co. surged 3.7 percent to a record after it was added to the index.

Zoomlion Heavy Industry Science and Technology Co. lost 3.6 percent after it was removed from the Hang Seng China Enterprises Index. BYD Co. jumped 5.5 percent after the stock was added to the gauge.

Shanghai Gains

The Shanghai Composite Index rose 0.6 percent, its fifth day of gains, as a rally for gold producers and automakers overshadowed losses for property and phone companies.

The S&P BSE Sensex of Indian shares retreated 0.6 percent, halting a two-day increase. Cipla slumped 6.2 percent, the most since May 2010. The company was cut to neutral from overweight at HSBC Holdings Plc after it reported quarterly net income that trailed estimates.

Hyundai Merchant Marine Co., which does business in North Korea, tumbled 6.7 percent in Seoul after North and South Korea failed to reach an agreement at yesterday’s talks. The Kospi index lost 0.6 percent, halting a six-day rally.

The won fell for the first time in five days. South Korea’s five-year bond yields dropped to the lowest level since November after the nation’s central bank kept borrowing costs unchanged.

Benchmark equity gauges in Taiwan, Malaysia and Thailand slid at least 0.3 percent.

To contact Bloomberg News staff for this story: Nguyen Kieu Giang in Hanoi at giang1@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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